How would he explain the MSCI World in simple terms? Werner Hedrich doesn’t have to think twice: “It’s simple: you take the most successful companies and string them up on a thread,” says the managing director of the asset manager Globalance Invest. In the case of the MSCI World, that would be a fairly long thread: this global stock market index comprises around 1,600 companies from 23 countries.
In the past few years in particular, the MSCI World has established itself as an investor’s favorite. Why? On the one hand, the MSCI World as a stock index unites many companies and shows whether they are moving up or down together. On the other hand, it is considered an “all-round carefree package” for investors who do not want to spend hours looking for the supposedly best stocks, but prefer to buy a package. For some years now, more and more private investors have been following one-to-one large share indices such as the MSCI World with so-called exchange-traded index funds (ETFs). Because it’s easy and cheap, the SZ will be presenting the most important stock market barometers in a series over the next two weeks.
The big advantage of the MSCI World: Whether an industry or an individual company is doing badly is not decisive for the entire index. Anyone who relies on the MSCI World is ultimately buying the pattern of the major world exchanges. With ETF index followers, for example from the provider Invesco (ISIN: IE00B60SX394) or from Xtrackers (IE00BJ0KDQ92), investors can follow the global index.
The name MSCI World is a bit misleading: The index contains mainly large and medium-sized companies from industrialized countries, emerging countries such as China or Brazil are not represented. In addition, the MSCI World, which is sometimes called the “World Index”, has a strong focus on the USA. For example, if investors put a hundred euros in the index, almost 70 percent of it ends up on the New York Stock Exchange. Because many globally successful companies such as Apple, Microsoft and Amazon are listed there, the proportion of US companies in the MSCI World is correspondingly large. For investors, at least so far, this has paid off: They were able to pocket a decent return with the index, on a long-term average a little more than eight percent per year.
The MSCI World can be particularly suitable for entering the stock market. “It makes sense for anyone who wants to invest in the stock markets in a cheap way,” says asset manager Hedrich. The problem: There are many companies in it that, like the oil company Exxon or the mining company BHP, are damaging the climate. If you want to pay attention to these aspects, you have to look around further.